ELR Citation: ELR 21430
No(s). 1:CV-93-1482 (M.D. Pa. Oct 19, 1994)

The court holds that attorneys representing Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) defendants that own the Keystone Sanitation Landfill waived their attorney-client privilege with respect to billing statements and must provide codefendant waste generators with unredacted attorney billing statements related to any legal services provided with respect to the owners' transfer of assets. The owners inadvertently included in a prior document production internal electronic mail printouts from their attorneys showing that the attorneys were providing the owners with legal advice as to how to take assets out of their corporation. The generators sought disclosure of any attorneys' billing statements addressing this area of information, including the names of attorneys and the narrative of the legal services provided. The court first holds that absent a waiver, the attorney-client privilege would protect the billing statements as the generators wish them to be produced. The court then applies five factors commonly used to determine whether documents have lost their privilege through inadvertent disclosure. Applying the first factor, the court holds that the precautions taken to prevent inadvertent disclosure were not reasonable in view of the extent of the document production. The owners were not under an immediate deadline for completion of the production and did not request additional time to review the documents so that they could devise a statement of privilege before they began production. The court next holds that the second and third factors, which require an evaluation of the number and extent of disclosures, weigh in favor of finding a waiver. Although there were only two documents revealing that attorneys were advising the owners on the disposition of assets, the extent of disclosure is complete. The court next holds that the fourth factor, the issue of delay or measures taken to rectify the inadvertent disclosure, is not significantly implicated in this case, because the parties began arguing the waiver issue within a few weeks of the disclosure. The court next holds that the last factor, whether the overriding interests of justice would or would not be served by relieving a party of its error, weighs squarely in favor of waiver. To preclude discovery as to whether liable parties are or were deliberately dissipating their assets to avoid a share of liability runs directly counter to CERCLA's primary goal of ensuring that liable parties bear their fair shares of the costs of environmental cleanup. And to do so based on a claim of privilege, when there has been an inadvertent disclosure of documents suggesting that this is the case, runs counter to the interests of justice. The court holds that the balance of these factors weighs in favor of holding that the owners have waived any privilege that may have protected their attorneys' billing statements from disclosure with respect to the narrative of services and identities of attorneys performing services. The court thus orders them to produce all attorneys billing statements related to legal services provided with respect to the transfer of assets, without redacting the names of attorneys performing services or the narrative of services provided.

On reconsideration, the court rejects the owners' argument that the disclosed documents were not privileged in the first place, and that their disclosure therefore cannot operate to waive a privilege as to the narrative portions of the billing memoranda. The court notes that if the generators requested all electronic mail messages between the owners' attorneys that contained any reference to the disposition of the owners' assets, the owners would have refused on the grounds that the documents contained privileged communications. The court next holds that one of the owners may not refuse, based on the Pennsylvania accountant-client privilege, to answer questions in deposition concerning disposition of the owners' assets. There is no federal accountant-client privilege, and because this case is before the court on a federal question, the federal common law of privilege applies, not Pennsylvania's statutory law. Further, Pennsylvania's law of privilege would not preempt the federal law even if it were asserted only with respect to a state-law claim, which the court does not believe it is. When a federal and state claim are tried together in federal court, the federal law of privilege applies even if claim of privilege is raised only in reference to the state claim. The court next holds that the owner must answer questions regarding attorneys' assistance or advice regarding the disposition of assets. Finally, the court stays its order with respect to the attorney-client privilege to afford the owners the opportunity to petition the Third Circuit for a writ of mandamus on this issue.

[A prior decision in this litigation is published at 25 ELR 20579.]

Counsel for Plaintiff
Myles E. Flint
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Robert B. Hoffman
Reed, Smith, Shaw & McClay
213 Market St., P.O. Box 11844, Harrisburg PA 17108
(717) 234-5988